5/16 – 30 YEAR FIXED DOWN TO 4.5% , IS NOW A GOOD TIME TO BUY A NEW HOME?

MORTGAGE RATES LOWER FOR THE FOURTH STRAIGHT WEEK:  Rates are smoking right now.  30 Year fixed rates have dropped to 4.5% – typically costing approximately 1 point to get.  20 year fixed rates dropped to 4.25%.  15 year fixed rates dropped to 3.75%.  You can get a low closing cost 10 year fixed loan at 3.375% right now!!

Rates have improved for 4 straight weeks.  Be cautious in floating a rate.  Rates won’t go one way or the other for too long, and typically when they reverse we get some pretty substantial pull back.  Rates have now improved for 4 straight weeks – they will get some pull back soon. 

IS NOW THE TIME TO BUY A NEW HOME?:  In most markets, we are seeing that it is cheaper to own than to rent.  Rates are low and home values are low.  Freddie Mac reported this week that home prices nationally are down 2.8% in 2011 and they expect an increase in new home sales of 5% for 2011.

There are two reasons that most people are not buying a new home that have the ability and want to buy a new home.

1.)  Buyers don’t know that they can qualify for a new loan.  These potential customers probably have had some credit issues in the past and are unsure about their qualification prospects.  Keep in mind that qualifying for a new loan is relatively easy right now.  You can do a new purchase loan with a 580 Fico score and only put down 3.5% of the purchase value.  Just because you have had a foreclosure or short sale does not mean you can not qualify for a new loan – you only have to wait 2 to 3 years before you can buy again. 

Call me or call a loan officer you trust.  Check it out – you may be able to qualify and having one person pull your credit does not dramatically lower your scores like some people think. 

2.)  Buyers are afraid to buy because they don’t think the market has hit the bottom.  This is a legitimate concern.  Some markets are probably not at the bottom, but I think most can agree that we are past the rapidly depreciating phase.  One thing to keep in mind is that rates are still very low.  If they go up (which they eventually will – and already have from last year), you could see a higher payment on a cheaper home.

For example – You buy a 250,000 home, put 20% down and do a new loan at a 4.5% 30 year fixed rate.   Your PI payment would be $1,013.37.

Now let’s say you decided to wait and that same house a year later is now only 230,000.  You get a better deal, but rates have risen to 5.5%.  You put 20% down, do a new loan for 184,000 at a 5.5% 30 year fixed rate.  Your new PI payment is $1,044.73. 

So even though you have bought a cheaper home, you will pay 11,422 more over 30 years because rates are higher. 

This is really a big deal because some people think rates this low will last forever and they won’t.  And when they do go up, they can go up quickly.  In November 2010, rates went up by .75% is less than 4 weeks. 

Values are low, rates are great.  Right now is a great time to buy a new home!!

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